Ireland’s M&A environment remains strong despite Brexit and global uncertainty

The first six months of 2019 shows strong activity for Ireland’s merger and acquisition (M&A) market.  Deal value is  up 24% compared to the same period last year but deal volume dropped on the back of weaker sentiment due to global economic uncertainty and Brexit unease. That said Ireland continues to be an attractive destination for international investment according to the Mid-year M&A Review 2019, in association with Mergermarket.

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Key findings include:

• There were 75 deals in H1 2019, down from 93 deals announced in H1 2018
• Deal value increased to €2.5bn
• 21 private equity transactions worth €1.8bn, a 74% rise compared to H1 2018
• Inbound M&A value in H1 2019 totalled €2.2bn
• Technology, Media and Telecom (TMT) accounted for 55% of disclosed deal value (€1.4bn) and 22% of deal volume (17 deals)
• Financial services recorded 11 deals, representing 15% of all announced deals

Shane O’Donnell, Corporate/M&A Partner, stated: “Brexit; concerns that the global economy is reaching the peak of the cycle; and escalating trade tensions between the US and China have all contributed to dealmakers’ reason for pause. The impact of this geopolitical uncertainty was observed in Q4 2018, and with dealmakers no clearer on how these matters will conclude, the slowdown has carried over to Q1 2019 but we have seen a marked improvement in Q2. Whilst Ireland’s market has offered compelling value and opportunity for domestic and international investors, dealmakers are likely to adopt a more cautious approach until a clearer picture emerges of Ireland’s economic future.”

Deal focus

2019 has seen a more active Public M&A market in Ireland. In June, US-based pharma group Abbvie announced its agreement to acquire to Ireland’s Allergan in a US$86 billion (€77.4 billion) blockbuster deal, while Belgian headquartered publishing company Mediahuis took Ireland’s largest newspaper group Independent News & Media (INM) private in a deal valuing the company at €145.6m. Also noteworthy was UK-based private equity firm Epiris’s delisting of IFG Group in a €208m deal, while Green REIT recently announced its decision to sell to Henderson Park. All of which demonstrates ongoing international interest in Irish assets.

Private Equity (PE)

PE firms were one of the major contributors to deal activity in H1 2019. PE activity in Ireland totalled €1.8bn over the first six months of the year, a 74% rise compared to H1 2018. Although PE deal value is still well below recent years, PE firms are responsible for around three quarters of the overall deal value in Ireland in H1 2019. PE deal volume, meanwhile, has risen slightly from 19 to 21 deals, compared to H1 2018, even though overall deal volume in Ireland over the period dropped by 19%. International private equity firms were active buyers, closing four of the top five deals of the year, including the sale of aviation services firm ASL to UK house Star Capital for €208m.

Inbound Activity

Ireland continues to draw M&A interest from international buyers: inbound M&A value in H1 2019 totalled €2.2bn, a 28% increase on H1 2018. Volume dipped from 65 to 53 deals, in-line with overall M&A figures. Overseas investors led the five largest deals in Ireland over H1 2019 too. Despite the ongoing uncertainty and fears over Brexit, Ireland has attracted the largest number of relocations as a result of Brexit, with 100 firms moving jobs to the Irish capital.

Sectoral M&A Activity

Over the last five years the Technology, Media and Telecom (TMT), pharma and financial services sectors have consistently accounted for a significant proportion of the M&A activity in Ireland. In H1 2019 these industries have led in the M&A activity rankings once again. TMT was by far the dominant sector, accounting for 55% of disclosed deal value (€1.4bn) and 22% of deal volume (17 deals). Technology has been a steady source of deal flow in Ireland, with investors drawn to the country’s position as the world’s second largest exporter of computer software and information and communications technology.

Financial services came in second in terms of deal volume, with 11 deals, representing 15% of all announced deals. Notable deals include Allied Irish Bank and First Data’s acquisition of Payzone and Brewin Dolphin’s acquisition of Investec Capital & Management from its parent for €44m. In these deals, institutions seek scale to leverage synergies, increase assets under management and reduce costs in an industry where margins have been squeezed by regulation and digital players that have been able to offer technology-enabled services at lower costs than their more traditionally minded competitors.

In terms of value the industrial and chemicals sector ranked second, although there were only two deals with disclosed values, and the majority of this disclosed value was attributed to the €300m acquisition of the shutters and awnings business of CRH by PAI Partners-backed Stella Group. Although the size of the CRH transaction attributed towards the bulk of value for industrials and chemicals transactions, the sector was nevertheless the third largest by volume, accounting for 15% of deals.

Outlook for H2 2019

Looking ahead, Shane O’Donnell, noted: “The Irish economy is one of the fastest growing in Europe – the ease of transacting and its low corporate tax rate make the country an attractive option for overseas buyers and private equity firms, who have been the main drivers of deal flow over the last six months. Opportunities in the fast-growing but robust sectors of technology, financial services and life sciences, meanwhile, will also continue to draw local and international interests as corporates continue to deploy capital in these “hot” industries. The easing of trade tensions and Brexit reaching a stable outcome could bring significant improvements. Further, Ireland’s solid fundamentals suggest that it will continue to deliver plenty of M&A opportunities for buyers who want to invest in H2 2019.”

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